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Ryerson Reports First Quarter 2019 Results

CHICAGO – May 1, 2019 –Ryerson Holding Corporation (NYSE: RYI), a leading value-added processor and distributor of industrial metals, today reported results for the first quarter ended March 31, 2019.

Q1 2019 Key Achievements:

$1.23B

Net Sales

+31% vs. Q1 2018

18.8%

Gross Margin

+160 bps vs. Q4 2018

17.2%

Gross Margin, excl. LIFO*

-30 bps vs. Q4 2018

$29.5M

Net income attributable to Ryerson Holding Corporation

+$19.1M vs. Q1 2018

$63M

Adj. EBITDA, excl. LIFO

+1% vs. Q1 2018

3.7x

Net Debt / LTM Adj. EBITDA, excl. LIFO

-1.3x vs. Q1 2018

*excluding Purchase Accounting adjustments in Q4 2018

A reconciliation of non-GAAP financial measures to the comparable GAAP measure is included in this news release

$ in millions, tons in thousands except

average selling prices and EPS

Three Months Ended

Financial Highlights:

Q1 2019

Q4 2018

Q1 2018

QoQ

YoY

Tons shipped

619

577

526

7%

18%

Revenues

$1,231

$1,160

$941

6%

31%

Average selling prices

$1,988

$2,010

$1,790

(1%)

11%

Gross margin, excl. LIFO and purchase accounting adjustments

17.2%

17.5%

18.9%

(30 bps)

(170 bps)

Warehousing, delivery, general, & administrative expenses

$164

$171

$131

(4%)

25%

As a percentage of revenue

13.3%

14.8%

13.8%

(150 bps)

(50 bps)

Adjusted net income

$30

$6

$10

Diluted adjusted earnings per share

$0.79

$0.16

$0.28

Adj. EBITDA, excl. LIFO

$63

$51

$62

25%

1%

As a percentage of revenue

5.1%

4.4%

6.6%

70 bps

(150 bps)

Balance Sheet and Cash Flow Highlights:

Net debt

$1,135

$1,130

$967

Net debt / LTM Adj. EBITDA, excl. LIFO

3.7x

3.7x

5.0x

Days of supply

75

82

68

Net cash provided by (used in) operating activities

($19)

$120

$32

A reconciliation of non-GAAP financial measures to the comparable GAAP measure is included in this news release

Management Commentary

Eddie Lehner, Ryerson’s President and Chief Executive Officer said, “I want to thank our customers for the opportunity to earn your business, which we never take for granted, and my Ryerson and CS&W colleagues for an outstanding start to the year. Ryerson grew net income and market share while generating expense leverage and managing working capital effectively to deliver strong earnings per share and higher Adjusted EBITDA, excluding LIFO in the first quarter of 2019 compared to both the first quarter of 2018 and fourth quarter of 2018. We accomplished these financial objectives despite well chronicled disruptive winter weather conditions, falling commodity prices, and rising average inventory costs which compressed margins through the first quarter. Ryerson’s network of intelligent service centers is providing ever better solutions and experiences to our customers as we continue bringing new value-added capabilities to the market.”

In the first quarter of 2019, Ryerson achieved revenues of $1.23 billion, an increase of 30.8 percent compared to $941 million in the first quarter of 2018, with tons shipped 17.7 percent higher and average selling prices 11.1 percent higher. Excluding the results of our third quarter 2018 acquisition of Central Steel & Wire Company (“CS&W”), revenues for the quarter were $1.06 billion, an increase of 12.5 percent year-over-year with average selling prices 13.1 percent higher and tons shipped down 0.6 percent. Ryerson gained market share during the first quarter of 2019 as North American volumes contracted 6.4 percent year-over-year according to the Metal Service Center Institute, or MSCI.

Gross margin was 18.8 percent for the first quarter of 2019, compared to 17.5 percent for the same quarter last year and 17.2 percent in the fourth quarter of 2018. Included in cost of materials sold during the first quarter of 2019 was LIFO income of $20.1 million, in-line with management’s guidance of $15 million to $20 million, compared to $13.3 million of LIFO expense in the first quarter of 2018 and LIFO expense of $0.9 million in the prior quarter. Gross margin, excluding LIFO and purchase accounting adjustments was 17.2 percent in the first quarter of 2019 compared to 18.9 percent in the first quarter of 2018 and 17.5 percent in the fourth quarter of 2018.Gross margins, excluding LIFO declined on a year-over-year and sequential basis primarily due to the decline in commodity prices experienced in the second half of 2018 and first quarter of 2019. A reconciliation of gross margin, excluding LIFO and purchase accounting adjustments to gross margin is included below in this news release.

Warehousing, delivery, selling, general, and administrative expense increased by $33.2 million, or 25.4 percent in the first quarter of 2019, compared to the year-ago period primarily driven by the acquisition of CS&W. On a same-store basis, expenses increased by $2.2 million, or 1.7 percent, compared to the first quarter of 2018. Warehousing, delivery, selling, general, and administrative expenses as a percentage of sales declined to 13.3 percent in the first quarter of 2019, or 12.5 percent on a same-store basis, compared to 13.8 percent in the first quarter of 2018.

Net income attributable to Ryerson Holding Corporation was $29.5 million, or $0.78 per diluted share, in the first quarter of 2019 compared to $10.4 million, or $0.28 per diluted share, in the prior year period. Ryerson achieved Adjusted EBITDA, excluding LIFO of $63.0 million in the first quarter of 2019, an increase of $0.8 million compared to the same quarter last year. A reconciliation of Adjusted EBITDA, excluding LIFO to net income attributable to Ryerson Holding Corporation are included below in this news release.

Liquidity & Debt Management

In the first quarter, Ryerson’s inventory balance stood at 75 days of supply, or 72 days on a same-store basis, compared to 82 days in the fourth quarter. Our inventory on hand was within our target range of 70 to 75 days as CS&W continued its commendable progress in moving inventory levels meaningfully closer to acquisition post-closing targets.

Cash used in operating activities was $18.5 million for the first quarter of 2019 compared to cash provided by operating activities of $31.7 million in the year-ago period, driven primarily by targeted inventory restocking partially offset by strong net income generation. Ryerson expects to generate cash from operating activities each quarter for the remainder of 2019 given our current view of gradual and moderate counter-cyclicality for the balance of the year. Further, Ryerson maintained a consistent leverage ratio of 3.7 times net debt to LTM Adjusted EBITDA, excluding LIFO compared to the fourth quarter of 2018 and ample liquidity of $460 million compared to $381 million in the first quarter of 2018, even with the repurchase of $11.6 million of our 11 percent Senior Secured Notes in January 2019.

CS&W continued to enhance Ryerson’s commercial, processing, and operational strengths during the first quarter with net sales of $172.2 million and $3.4 million in Adjusted EBITDA, excluding LIFO. As part of Ryerson’s post-close optimization plan, CS&W has realized approximately $22 million of expense savings on an annualized basis from supply chain synergies and operational expense take-outs. Further, Ryerson realized approximately $12 million of cumulative proceeds since the acquisition from real estate sales for operations that were consolidated into existing facilities. CS&W’s improved working capital management has decreased inventory days of supply from 115 days in the fourth quarter of 2018 to 94 days in the first quarter of 2019 while delivering improved on-time delivery metrics. CS&W experienced peak margin compression in the first quarter of 2019 given its longer inventory holding period compared to other Ryerson facilities. Management anticipates stronger margins and EBITDA results in the second quarter of 2019.

Outlook Commentary

Ryerson anticipates tons shipped to be flat in the second quarter of 2019 compared to the first quarter of 2019 as customer demand sentiment remains stable in most of our key end-markets while channel inventories continue to destock from over-supplied levels and mill lead times remain short. Average selling prices as a function of softening commodity pricing across carbon, aluminum, and nickel are expected to decline 1 to 3 percent sequentially. Ryerson expects gross margin, excluding LIFO to expand approximately 30 to 50 basis points from the levels experienced in the first quarter of 2019 as average costs decline during the quarter at a slightly faster rate than average selling prices. Based on these expectations, Ryerson management currently anticipates earnings per diluted share in the range of $0.77 to $0.87 for the second quarter of 2019 and Adjusted EBITDA, excluding LIFO to be in the range of $64 to $68 million. A reconciliation of Adjusted EBITDA, excluding LIFO to earnings per diluted share is included below in this news release.

Same-store Key Financial Metrics Reconciliation

Three Months Ended March 31, 2019

$ in millions, tons in thousands

Central Steel & Wire Company

Ryerson Same Store

Ryerson Holding Corporation

Tons Shipped

96

523

619

Revenues

$172

$1,059

$1,231

Gross Margin, excl. LIFO

18.9%

16.9%

17.2%

Warehousing, delivery, general, & administrative expenses

$31

$133

$164

As a percentage of revenue

18.0%

12.5%

13.3%

Adj. EBITDA, excl. LIFO

$3

$60

$63

As a percentage of revenue

2.0%

5.7%

5.1%

First Quarter 2019 Major Product Metrics

Tons Shipped (thousands)

Average Selling Prices

Q1 2019

Q4 2018

Q1 2018

Quarter-over-quarter

Year-over-year

Quarter-over-quarter

Year-over-year

Carbon Steel

474

446

394

6.3%

20.3%

-1.2%

17.4%

Aluminum

59

54

56

9.3%

5.4%

-0.1%

16.7%

Stainless Steel

80

73

74

9.6%

8.1%

-3.9%

7.1%

Net Sales (millions)

Q1 2019

Q4 2018

Q1 2018

Quarter-over-quarter

Year-over-year

Carbon Steel

657

626

465

5.0%

41.3%

Aluminum

273

250

222

9.2%

23.0%

Stainless Steel

278

264

240

5.3%

15.8%

Earnings Call Information

Ryerson will host a conference call to discuss its first quarter 2019 results Thursday, May 2, 2019 at 10 a.m. Eastern Time. Participants may access the conference call by dialing 833-241-7253 (Domestic) or 647-689-4217 (International) and using conference ID 4575506. The live online broadcast will be available on the Company’s investor relations website, ir.ryerson.com. A replay will be available at the same website for 90 days.

About Ryerson

Ryerson is a leading value-added processor and distributor of industrial metals, with operations in the United States, Canada, Mexico, and China. Founded in 1842, Ryerson has around 4,600 employees in approximately 100 locations. Visit Ryerson at www.ryerson.com.

Safe Harbor Provision

Certain statements made in this press release and other written or oral statements made by or on behalf of the Company constitute “forward-looking statements” within the meaning of the federal securities laws, including statements regarding our future performance, as well as management’s expectations, beliefs, intentions, plans, estimates, or projections relating to the future. Such statements can be identified by the use of forward-looking terminology such as “objectives,” “goals,” “preliminary,” “range,” “believes,” “expects,” “may,” “estimates,” “will,” “should,” “plans,” or “anticipates,” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. The Company cautions that any such forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements as a result of various factors. Among the factors that significantly impact the metals distribution industry and our business are: the cyclicality of our business; the highly competitive, volatile, and fragmented market in which we operate; fluctuating metal prices; our substantial indebtedness and the covenants in instruments governing such indebtedness; the integration of acquired operations; regulatory and other operational risks associated with our operations located inside and outside of the United States; work stoppages; obligations under certain employee retirement benefit plans; the ownership of a majority of our equity securities by a single investor group; currency fluctuations; and consolidation in the metals producer industry. Forward-looking statements should, therefore, be considered in light of various factors, including those set forth above and those set forth under “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2018, and in our other filings with the Securities and Exchange Commission. Moreover, we caution against placing undue reliance on these statements, which speak only as of the date they were made. The Company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events or circumstances, new information or otherwise.